International Media Watch of news headlines and current affairs reports about Romania

Wednesday, December 3, 2008

Romanian economy expands by 9.1 pct y/y in Q3

BUCHAREST, Dec 3 (Reuters) - The Romanian economy grew by 9.1 percent year-on-year in the third quarter, the fastest rate in the European Union, but analysts forecast a significant slowdown next year.

Analysts surveyed by Reuters last week expected the economy to grow by 8.85 percent, compared to 9.3 percent in the second quarter and 5.7 percent in the same period of last year.

They said a sharp slowdown was just around the corner as funding sources dry up, possibly halving this year's expansion rate in 2009.

"These growth figures are very likely to represent the peak of the growth cycle in Romania," said James Lord from Standard Bank in London.

"The outlook for the economy next year is quite dire."

The statistical office is due to release a detailed breakdown of the figures on Dec. 15, but economists said Wednesday's data underscored strong consumption rates continuing to power the economy.

The Romanian economy has doubled in size over the last four years as companies used foreign cash to modernise, the real estate market boomed and household spending rocketed.

However, the first signs of slowdown are appearing.

Romania saw some of its industrial hubs, such as Renault's Dacia car maker and Arcelor Mittal's giant steel plant in Galati cutting or even halting production over the last month because of falling demand.

Tighter access to foreign cash will also curtail growth, particularly after two rating agencies downgraded Romania to sub-investment grade because of government policy gridlock.

Moody's, which still sees Romania above "junk" level, said the country could slip into recession next year. The leu fell slightly after the GDP release to trade at 3.8350 per euro at 0840 GMT, but dealers said the unit was moved by commercial flows, ignoring the economic data as it was fairly in line with expectations.

Elsewhere in the region,Hungary's economic growth slowed to 0.8 percent in the third quarter. Poland's third quarter economic expansion was the slowest in three years at 4.8 percent.